Financing Child Care in the United States - Ewing Marion Kauffman ...

GENERATING PUBLIC REVENUE TAX CREDITS, DEDUCTIONS AND EXEMPTIONS
BANK OF AMERICA CHILD CARE
PLUS (MULTISTATE)
DESCRIPTION
Child Care Plus is a work–life benefit offered by Bank of
America to help its eligible associates pay for child care
expenses. (“Associate” is the term Bank of America uses
for employees.)
WHEN ESTABLISHED
Child Care Plus began in 1989 and is now available to
associates at all Bank of America locations in 21 states
throughout the United States. Bank of America has
participated in the state of Florida’s Child Care Executive
Partnership program since it began in 1998. (For more
information about Florida’s Child Care Partnership Act,
see page 141).
ANNUAL AMOUNT
In 1999, Bank of America invested $22 million in support
of 26,561 children.
SERVICES FUNDED
The Child Care Plus program is structured as a
Dependent Care Assistance Plan (DCAP) following
standard Internal Revenue Service regulations and is a
tax–free benefit. As IRS regulations specify, any licensed
or registered child care provider can be used, as well as
“informal” child care (i.e. care provided by a friend or
relative, except a spouse or minor child). Child care for
children under age 13 is allowed. School–age programs
can be reimbursed whether used year–round or only
during breaks and summer vacation. The child must be
claimed by the associate as a dependent for tax
purposes. Eligible associates can receive up to $152 per
month, per child, toward child care expenses in addition to
their regular pay.
HOW FUNDS DISTRIBUTED
A simple one–page flier explaining the benefit is discussed
with new associates during orientation. Participants in
Child Care Plus pay for their child care directly. The
parent completes a request for reimbursement form
stating the amount paid to the child care provider. Both
the parent and the child care provider sign the form.
The reimbursement is included with regular Bank of
America pay.
POPULATION SERVED
Any associate of Bank of America who works at least 20
hours per week, needs child care to work, has an annual
base salary of less than $30,000 and an annual family
income of less than $60,000 is eligible.
STRATEGIC CONSIDERATIONS
• Bank of America believes child care benefits strongly
motivate company loyalty and have proven
cost–effective. Turnover among participants in Child
Care Plus is half that of comparable Bank of America
associates who do not participate in the program.
• The quality and stability of child care are company
concerns because they affect worker productivity,
especially for those associates who are not able to pay
enough to get quality child care.
• Incentives for quality can be incorporated into a child
care benefit through rewards for choosing better child
care, such as paying more to families who choose
accredited providers.
• Keeping the benefit simple and making it accessible to
associates are important considerations, as is ensuring
cost–effective administration.
• Working families may be able to take advantage of
federal and/or state tax provisions, including
dependent care tax credits and the Bank of America
dependent care assistance. Families need to carefully
analyze the tax benefits of various approaches and any
interactions among them, which can be complex.
• Dependent Care Assistance Plans with employer
contributions, such as those offered by Bank of
America, are more helpful to low– and middle–
income associates than traditional DCAPs because
these associates typically cannot afford to set aside
income and wait for reimbursement. Also, the design
of Child Care Plus eliminates the possibility of an
associate suffering a loss under the “use it or lose it”
rule of DCAPs.
• Bank of America also offers a traditional DCAP for
associates whose income makes them ineligible for
Child Care Plus. This permits associates to reduce their
taxable salary by an amount up to $5,000 per year and
use the funds to pay for child care. DCAP funds —
both traditional and the Child Care Plus program — are
exempt from federal income, unemployment and Social
Security taxes as well as exempt from state income
taxes (except in New Jersey).
• Bank of America offers on–site child care centers
in five locations, supporting two–thirds of the cost
of these centers. When space permits, financially
supported back–up child care also is offered.
Associates can choose to participate in Child Care
Plus or take advantage of the sliding fee scale of
the center, which is based on income.
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